Thursday, 16 December 2021
Department of Finance
My Department has been monitoring developments in virtual currencies, and blockchain in general, both in Ireland and globally for almost five years.
It has always been my intention that any regulation in this space would be adequate, proportionate and comprehensive without discouraging innovation.
Due to the global (or borderless) nature of virtual currencies, the potential threat to monetary sovereignty by virtual currencies like stablecoins, the speed of change and complexity in the technology, and its potential use for illicit transactions, the regulatory response must be a coordinated global effort.
Regulatory gaps in the treatment of virtual assets must be identified and addressed across jurisdictions.
This is why the G7’s 2019 statement – reiterated in 2020 – helped set private sector expectations and motivate coordinated public sector action towards common regulatory expectations.
In September 2020, the European Commission published the Digital Finance Package containing measures which aim to enable and support the development of digital finance while mitigating risks.
The Digital Finance Package includes:
1. Strategy on Retail Payments
2. Legislative proposal on a market in crypto-assets (known as the MICA regulation)
3. Legislative proposals on digital and operational resilience (known as the DORA regulation)
4. Legislative proposal on a pilot regime for market infrastructures based on distributed ledger technology (known as the DLT pilot).
In relation to the MICA regulation proposal and the DLT pilot, officials from the department actively engaged with the Council Working parties throughout 2020 and this year.
On 24 November 2021, the European Parliament announced that it had reached agreement with the Council on the DLT pilot scheme. The project follows the ‘sandbox’ approach, allowing for temporary derogations from certain requirements under the EU’s financial services legislation.
On MICA, the European Parliament is still reviewing the proposal. The Council reached general agreement under the Slovenian presidency in November. The expectation is that trilogues would commence next year under the French presidency.
In Ireland, the Central Bank issued warnings to consumers in 2017 and 2018, with the latest advice issued in April of 2021, on the risks of buying virtual currencies.
The warnings clearly state that virtual currencies such as Bitcoin and Ether have no legal tender status to be used as means of payment, and are not guaranteed or regulated by the Central Bank of Ireland, or any other central bank in the EU.
As of 23 April 2021, the providers of certain services in relation to virtual assets must meet anti-money laundering and countering of financing of terrorism (AML/CFT) obligations, under part 4 of the CJA 2010 to 2021.
All VASPs (virtual asset service providers) established in Ireland are required to register with the Central Bank for these AML/CFT purposes.
Finally, the Competition and Consumer Protection Commission also updated their advice on purchasing and investing in digital and cryptocurrencies during June of this year, clearly outlining the risks.